NCDRC Holds Barnala Builder Liable For Deficiency In Service

Brief Facts of the Case

The complainants booked a flat in a project by Barnala Builders after seeing advertisements that claimed it was fully developed and clear of legal issues. They paid a large portion of the price, but the builder did not provide the buyer's agreement at first. Later, the builder gave them an agreement with many unexpected and unfair terms. The complainants also received several arbitrary service tax demands without a proper explanation. Despite paying over ₹34 lakh, they were only given a paper possession letter, while actual development, utility connections, and statutory certificates were still missing. They asked for a refund, but the builder only threatened forfeiture. They filed a complaint before the State Commission of Punjab seeking a refund with interest, compensation, and costs. The State Commission held that the builder was deficient in service and ordered a refund of ₹34,27,747 with 12% interest, ₹1 lakh compensation, and ₹11,000 as litigation costs. Aggrieved, the builder filed an appeal before the National Commission.

Contentions of Barnala Builders

The builder argued that the flat was ready and most buyers had already moved in. They claimed the complainants' delayed payments and violated the agreement terms. The builder also said that service tax was legally payable and that the complainants had not challenged the calculation before. They cited earlier rulings to support their right to impose charges and interest for delays.

Observations by the National Commission

The National Commission thoroughly reviewed the circumstances and concluded that, despite a few small late payments, the complainants largely complied with the requirements of the down payment and paid the majority of the consideration. It reaffirmed that in consumer instances, giving interest and a refund is a kind of compensation in and of itself, and that it's not always appropriate to make a second lump amount payment. According to the Commission, the State Commission's 12% interest rate and ₹1 lakh compensation were disproportionate in the given situation. The Commission changed the State Commission's decision based on the Supreme Court's opinion in Experion Developers Pvt. Ltd. vs. Sushma Ashok Shiroor, 2022 LiveLaw (SC) 352, which made it clear that 9% interest is acceptable and restitutory in refund proceedings.It reduced the interest rate from 12% to 9% per annum from the date of each deposit made by the complainants.

The commission highlighted that it is a well-established principle that in consumer cases, granting interest along with a refund serves as a form of compensation. Therefore, awarding an additional ₹1 lakh as separate compensation was unnecessary. Hence, it set aside the ₹1 lakh compensation previously awarded by the State Commission, but increased the litigation costs from ₹11,000 to ₹40,000. The Commission directed the builder to make the full payment as per the modified order within six weeks, failing which the outstanding dues would carry an interest of 12% per annum until final realisation.

Case Title: M/S. Barnala Builders & Property Consultants Vs. Ritika Gill & Anr.

Case Number: NC/FA/120/2017

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